Rupee to get fresh boost from further drop in crude, RBI decision awaited
The Indian rupee will strengthen further on Wednesday, with a continued decline in oil prices on signs of progress in U.S.-Iran talks lifting the currency past the 95-per-dollar mark.
The currency is expected to open in the 94.94 to 95.02 range, according to traders, after settling at 95.3775 against the dollar on Tuesday. A break past the 95 level would lift the rupee to its highest level in a month, extending its recovery from recent lows to nearly 2%.
The rebound has been underpinned by Brent crude's retreat from a recent peak of around $102 a barrel to $78.80. Regular intervention by the Reserve Bank of India and robust capital inflows linked to measures announced by the central bank in June have also supported the currency.
Brent tumbled 5.2% on Tuesday and extended losses by another 1% in Asian trade amid comments from Qatari and U.S. officials that fuelled hopes of a diplomatic resolution to the five-month-long Iran conflict.
Oil price moves have been one of the biggest drivers of the rupee and its near-term bias, a currency trader said. If the rupee is to hold on to its current level, oil prices need "to stay contained".
The trader said the RBI's policy decision, due at 10:00 a.m. IST, was unlikely to have a significant market impact, given the limited scope for surprises.
STATUS QUO
India's central bank is expected to leave interest rates unchanged, with 68 of the 72 economists polled by Reuters forecasting a status quo.
"The policy will take place against the continued uncertainty on the West Asia crisis and monsoon outlook. However, compared to the June policy, the level of uncertainty is lower on both growth and inflation," IDFC First Bank said in a note.
